US: SEC Wins Suit Against Ex-Carting Official
A former Waste Management Inc. chief financial officer was found liable Thursday for civil fraud and other securities violations that federal officials said caused investors to lose more than $6 billion.
James Koenig was found liable by a jury that deliberated for a day and a half on evidence presented by Securities and Exchange Commission attorneys over an 11-week trial before U.S. District Judge Wayne R. Andersen.
The allegations of corporate fraud at the company--one of the largest U.S. trash collectors and landfill operators--were the biggest ever brought by the government when the case was filed in March 2002. Since then, the fraud has been surpassed by the massive accounting scandal at WorldCom and others, officials said.
"This was the first billion-dollar plus financial fraud that the SEC took on and this is the most decisive resolution that we could hope for," said John D. Worland Jr., one of three SEC attorneys at the trial.
Waste Management restated its earnings by $1.7 billion in 1997 after new management took over. The restatement caused a $6 billion decline in the value of company shares.
The Houston company had been in decline and government attorneys said the earnings had been inflated from 1992 through 1996 to keep share prices up and help management hang onto their jobs.
Waste Management's founder and former chairman and chief executive, Dean L. Buntrock, along with four other executives settled with the SEC in September 2005 and agreed to pay more than $30 million, although they admitted none of the allegations contained in the suit.
Koenig maintained throughout the case that his accounting of the company's earnings had been completely accurate.
"We are disappointed by the jury's verdict," said Koenig attorney Sarah R. Wolff. "We think the evidence doesn't support the verdict and we stand by our client and we are actively considering an appeal of these claims."
The jury found Koenig liable on all of the allegations against him, ranging from securities fraud to lying to auditors.
Among the witnesses were a number of accountants from the former Arthur Andersen accounting firm.
Some of the accountants testified that following a 1993 audit that showed problems they sat down with Koenig and he agreed to a series of "action steps" that would fix the problems but changes never were made.
Witnesses said Koenig received hundreds of thousands of dollars in bonuses while government regulators say he was inflating the earnings.
The government is expected to ask Andersen to require Koenig to pay a substantial penalty and bar him from serving as an officer or director of a publicly traded company. A status hearing is set for July 17.
- 201 Executive Compensation